Meanwhile, former Illinois Insurance Commissioner Michael McRaith started work in June as the first director of the new Federal Insurance Office. McRaith previously worked in various capacities in connection with the National Association of Insurance Commissioners, and was an attorney in private practice for 15 years in Chicago, representing insurers and other financial institutions.
McRaith leads a new federal office with little regulatory power but that will report to Congress next year on gaps in the existing state-based regulation of insurers.
Court decision clears way for lawsuits. A California appeals court ruling in June appears to open the way for policyholders to sue insurers for violations of the state’s anti-steering regulation rather than leaving enforcement of that section of the insurance code up to the Insurance Commissioner.
The appeals court reversed a lower court’s dismissal of Chris Hughes’ potential class action suit against Progressive. Hughes sued Progressive claming that the insurer didn’t tell him after a 2005 accident that he had the right to select the shop that would fix his vehicle (and he thus took it to a Progressive DRP shop and was unhappy with the work).
California insurance code prohibits insurers from suggesting or requiring use of a particular shop unless the insured asks for a referral or is notified in writing of the right to use any shop. Hughes’ suit said Progressive has a company-wide practice of using “its position of power over its insured, in the form of incentives and requirements to carry out its program of steering.”
Progressive argued that prior court rulings held that suits brought by private parties to enforce the insurance code are not provided for under California law. But the appellate court found that Hughes was not suing over a violation of insurance code but for violation of unfair competition law.
Texas again cautions insurers. Texas, too appears to be brewing as a key battleground in the fight over steering. For the second time within a year, the Texas Department of Insurance has issued a bulletin reminding insurers that state law prohibits them from “directly or indirectly” limiting auto insurance coverage by limiting policyholders from using a shop of their choice.
The bulletin also states that while an insurer is not required to pay more than a reasonable amount for repairs or repair parts, neither that nor policy language suggests that the reasonable amount for repairs or parts must be based on the amounts charged by DRP shops.
Insurance Commissioner Mike Geeslin said that despite his similar warning last August, his department continues to receive reports of insurers steering and limiting reimbursement rates.
Others states pass or consider insurance legislation. Alabama Gov. Robert Bentley has signed a new law to create by 2013 an electronic database to match up cars in that state to valid insurance policies; the system will enable law enforcement officials and DMV officials registering vehicles to verify proof of insurance. Officials estimate that about 22 percent of Alabama drivers lack car insurance.
A legislative proposal in Michigan would allow low-income drivers with clean driving records in Wayne County (which includes Detroit) to purchase reduced personal injury auto insurance coverage for lower rates; data from the Insurance Information Institute indicates Detroit drivers have the highest premiums in the country, 56 percent more than second-place New Orleans.
A new law in Nevada raises the penalties for drivers who let their insurance lapse; a single lapse of 30 days or less carries the same $250 penalty that had been in place in the state, but longer or multiple lapses can raise the penalty to as high as $1,250.
Rhode Island has passed a budget bill that as of October 1 will require consumers whose vehicle is a total loss to pay sales tax on the full value of a replacement vehicle. Superintendent of Insurance Joseph Torti has issued an advisory saying insurers will have to include sales tax in their settlement calculation on total losses in order to fully compensate the policyholder.
Under a legislative proposal in Massachusetts, insurers and lienholders could not mandate that a vehicle owner release of any “black box” data from a vehicle’s “event data recorder” as a condition of a policy or lease. The bill requires vehicle manufacturers to disclose the presence of such recorders, and designates the vehicle owner as the owner of any such data.
Reports on insurance complaints available. Missouri regulators have released the latest report on consumer complaints about auto insurers, showing complaints fell by 14 percent last year to fewer than 3,100. For a copy: http://tinyurl.com/64kp2yf
And Wisconsin regulators said they received about 780 complaints against auto insurers last year, about 10 percent of all consumer complaints related to insurance. For a copy: http://tinyurl.com/65dt64a
Other insurance-related news. GM will include one year of free auto insurance through MetLife for residents of Oregon or Washington who purchase a new GM vehicle by September 6. Commercial and fleet customers are not eligible. MetLife has the option to cancel the coverage after one year, and GM offers no discounts for those who choose to stick with their current insurer and opt out of the MetLife coverage. The automaker said it may expand the program to other markets if successful.
Also in the Northwest, some insurers are clearly keeping an eye on the ranking they are given by shops in an annual surveys similar to one conducted by a number of state associations around the country. Oregon Mutual Insurance, the 14th-largest auto insurer in that state, is including with its policy renewal mailings to its insureds a flier touting the “B+” grade it received (which tied it for the highest grade among 21 insurers) from collision shops in a survey conducted by the Northwest Automotive Trades Association.